Core Producer Price Inflation Tumbles To 2.0% – Near 3 Year Lows

After collapsing 0.5% MoM in October (the most since April 2020) on the back of plunge in gasoline prices, analysts expect Producer Prices to be unchanged MoM in November and they were spot on (although October was revised up to a 0.4% MoM decline).

Headline PPI YoY declined to +0.9% – the lowest since June.

Source: Bloomberg

Excluding food and energy, the core PPI was cooler than expected, unchanged MoM in November versus expectations of a 0.2% MoM rise. That dragged the Core PPI YoY down to 2.0% – its lowest since January 2021…

Source: Bloomberg

Energy was once again a big driver of the decline…

While Food and Services inched higher MoM…

…thanks to as 58.8% surge in the price of chicken eggs.

Final demand goods:

The index for final demand goods was unchanged in November after dropping 1.4 percent in October. In November, price increases of 0.6 percent for final demand foods and 0.2 percent for final demand goods less foods and energy offset a 1.2-percent decrease in the index for final demand energy.

Product detail: Within final demand goods in November, prices for chicken eggs jumped 58.8 percent. The indexes for fresh fruits and melons, utility natural gas, electric power, and carbon steel scrap also moved higher. In contrast, prices for gasoline fell 4.1 percent. The indexes for processed poultry, industrial chemicals, jet fuel, and liquefied petroleum gas also moved lower.

Final demand services:

The index for final demand services remained unchanged in November, the same as in October. In November, prices for final demand services less trade, transportation, and warehousing edged up 0.1 percent. Conversely, the indexes for final demand trade services and for final demand transportation and warehousing services declined, 0.2 percent and 0.5 percent, respectively. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Within the index for final demand services in November, prices for traveler accommodation services rose 4.0 percent. The indexes for deposit services (partial); health, beauty, and optical goods retailing; food and alcohol wholesaling; and apparel, footwear, and accessories retailing also advanced. In contrast, margins for automobile retailing (partial) declined 5.1 percent. The indexes for chemicals and allied products wholesaling, portfolio management, furniture retailing, and truck transportation of freight also fell.

There was some more good news: intermediate PPI, widely seen as a leading indicator to final PPI, remains firmly in deflation…

Source: Bloomberg

This all seems like great news but we remind readers that the swing factor continues to be commodity prices, which in turn depend on how much stimulus China decides on, how much oil OPEC+ will pump and how much crude Biden will quietly dump to keep gas prices low into the election year.